British builders hiring staff at fastest rate in nearly two decades to keep up with booming demand

British builders are hiring staff at the fastest rate in nearly two decades to keep up with booming demand, it emerged yesterday.

A monthly report into the health of the construction industry showed that a surge in housebuilding and commercial development kept companies busy in June.

Employment in the sector rose at rates not seen since the survey was launched in April 1997 – the month before Tony Blair swept to power.

Safe as houses: The recovery in the construction industry has led to the biggest jobs boom since 1997

The report,
by Markit and the Chartered Institute of Purchasing and Supply,
suggested work has begun on 100,000 new homes already this year.

The
news rounded off another strong quarter for builders and drove the
pound higher against the dollar and the euro as investors bet on a rise
in interest rates before Christmas.

Chris
Williamson, chief economist at Markit, said: ‘Such persistent, strong
growth adds to the chance of interest rates starting to rise later this
year, rather than a first rate hike being delayed until 2015.’

A separate report by Nationwide showed average house prices soared 11.8 per cent in the year to June to a record £188,903.

Despite
the recovery in the construction sector over the past 18 months, output
is still some 10 per cent below the peak reached in 2008, having
crashed by around 17 per cent in the Great Recession.

Experts
warned that a shortage of skills – which is borne out by the biggest
increase in pay for sub-contractors such as bathroom fitters,
bricklayers and carpenters for at least 17 years – could hold back
future growth.

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Williamson
said: ‘Widespread skill shortages have developed after many tradesmen
and subcontractors left the sector, or left the country, during the
recession.’

He
added: ‘It’s all guns blazing at the moment. But growth is coming at a
price. Specifically, construction companies had to pay their
subcontractors higher rates amid record skill shortages.’

The comments were echoed by Jeff Fairburn, chief executive of housebuilder Persimmon.

‘In
order to continue to increase the number of houses we build we need to
address the skills shortage in the labour market,’ he said. The
Markit/CIPS purchasing managers’ index of activity in the construction
sector – where scores above 50 represent growth – rose from 60 in May to
a four-month high of 62.6 in June, while the employment index soared to
a record 64.

Manufacturers
also posted a decent score of 57.5 in the equivalent survey on Tuesday,
with factory output increasing at its fastest rate for 20 years in the
second quarter.

All
eyes will now be on today’s report into the powerhouse services sector
to see if the United Kingdom can rack up a hat-trick of upbeat surveys.
Martin Beck, senior economic advisor to the EY Item Club, estimated that
the British economy grew by 1 per cent in the second quarter of the
year, up from 0.8 per cent in the first three months and the best
performance since 2007.

The
pound rose as high as $1.7176 and €1.2577 as investors bet that the
Bank of England would be forced to raise interest rates before the end
of the year as the economic recovery strengthens.

Sterling
is now up 15.5 per cent against the dollar and 10 per cent against the
euro since July last year amid mounting confidence in the British
economy and expectations that the era of record low interest rates is
coming to an end.

David
Owen, an economist at Jefferies, said: ‘Having raised the flag of
hiking rates by year end, there remains a high probability that the Bank
will follow through, but not this side of the Scottish referendum on
September 18.

‘However,
from our perspective, if they do move in November, do not be surprised
if they then remain on hold until after the general election in May
2015.’